BNN COLLEGE

SELF FUNDED

Name: Akbar Ali Mohd. Shamoon Ansari

Class: SYBMS (A)

Roll No: 03

Subject: Research Method in Business

Teacher: Mahesh Mahajan

PROJECT REPORT ON

"Study of life Insurance Companies”

PREPARED BY

AKBAR ALI

STUDENT OF

B.M.S. (BACHELOR OF MANAGEMENT STUDIES)

2011-2012

SUBMITED TO

UNIVERSITY OF MUMBAI

&

B.N.N. COLLEGE, BHIWANDI

De c l a r a t i o n

I hereby declare that the work embodied in this project titled

"Study of different Life Insurance Companies” is my own

contribution to project work carried out under the guidance

of M r . Mahesh Mahajan

This project work has not been submitted for any other

degree. Where ever reference have been made it is has been

clearly indicated as such and included in references and

bibliography.

Date-

Place- Signature

Akbar Ali

Prof. Mahesh Mahajan

Student Akbar Ali Ansari

A c k n o w l e d g e m e n t

It is worthwhile to enclose my sincerest thanks to all the

persons who have helped me directly or indirectly during

completion of the Project Report in successful manner.

Firstly, I express my sincere gratitude to Mr. Mahesh Mahajan

for granting me permission to do this project. Then, I am very

much thankful to our course co-coordinator, Prof. Parbha

Pardesi for his encouragement and full fledge support in the

completion of this project.

I also express my sincere thanks and sense of gratitude to

my project guide Mr. Mahesh Mahajan for her valuable

guidance and suggestions at every stage right from choosing

the topic to the completion of project.

I express my sincere thanks and deep sense of gratitude to CA

Paras Shah for arranging our live project at HDFC

Standards Life Insurance Company, Bhiwandi branch.

I also express my sincere gratitude to the management of

HDFC Standard Life Insurance company for the kind

permission to undergo on implant visit in their company

(Bhiwandi branch).

Exe c u t i v e S u m m a r y

Insurance sector in India is booming but not to level

comparative with the developed economics such as Japan,

Singapore etc. Also liberalization of insurance sector has

provided huge self employment opportunities.

While doing a live project at HDFC Standards Life Insurance

Company, Bhiwandi branch I observed that sales

Development Managers were facing some serious problems

regarding retention of their financial consultants. The HDFC

Standards Life Insurance Company as well as other life

insurance companies is facing this problem.

To find the reasons, the main objective of the study is kept as,

to analyses the actual recruitment and retention process in Life

Insurance Companies and how far this process confirm to the

purpose underlying the operational aspect of the industry.

The study is proposed to find out a process that will help

insurance companies to keep its attrition rate minimum.

In this study, I analyzed recruitment process of three

different companies viz. Life Insurance Corporation of India,

HDFC Standards Life Insurance Company and MaxNew York

Life Insurance Company. After analysis I came to the

conclusion that some defects in recruitment process are the

reason of high attrition.

This project work is a sincere attempt to collect the

information stating the various reasons for attrition and

suggests the useful measures for retention.

I n d ex

Titles of Project

Declaration

Acknowledgement

Executive Summary

Introduction

The Literature Review

Problems

Why Insurance

Research Method Used

Objectives of Research

Scope of Study

Industrial Analysis

IRDA

Major Market Player in India

Major Market Share

Reference

Institute

I n t r o d ucti o n

The Insurance sector in India has came a full circle from

being an open market to nationalization and back to

liberalized market again. Tracking the development in

Indian Insurance Sector revels 360 degree turn witnessed

over a period of almost two centuries.

Ever since the liberalization of life insurance sector is done

private companies are facing many problems to create

their firm existence in the market.

Private companies find it difficult to compete against the

dominant LIC of India. But the common problem of LIC as

well as private life insurance companies is to retain their

Agents IFCsIAAs.

Agents IFCsIAAs have the potential to create a good as well

as bad image of the company. Agents IFCsIAAs who

enthusiastically spurred by dreams of working at one’s

own hours, getting full reward for the hard work and other

such motivational spiel meet reality soon enough.

The industry is facing a serious problem regarding the

shifting of jobs at top level management as well as at

agency force of company. Special attaint ion needs to be

given for their retention in their respective company

Literature Review

Summary of Recent Articles on the Convergence of Insurance and

Financial Markets and Services

Despite the adoption of the Gramm-Leach-Bliley Act (also called Financial Services Modernization Act) in November 1999, there have been few strategic attempts in consolidating financial and insurance businesses and some of them (i.e. the Citigroup/Travelers or the General Electric/ Employers Re. mergers) have failed. This, despite the fact that some of the research papers cited in the attached literature review do identify diversifications gains from potential consolidation of banking and insurance firms.

However, the inability of banks and insurance companies to merge effectively has not stopped the convergence process from a product offering standpoint. The Insurance Information Institute routinely publishes a chart of financial and insurance products available through major financial services companies from all sectors (financials, securities, P/C insurance, and life insurance). The chart demonstrates that all major financial services companies offer a diversified range of financial and insurance services. This suggests that, although some issues like consumer privacy provisions, data consolidations and other technological differences between both industries need to be ironed out, the convergence process is on its way. Refereed Papers:

Carrow Kenneth A. and Heron R. “Capital market reactions to the

passage of the Financial Services Modernization Act of 1999”.

The Quarterly Review of Economics and Finance 42 (2002): 465-

485.

The authors investigate how the passage of the Financial Services Modernization Act of 1999 (FMA) affected stock prices of banks, thrifts, finance companies and insurance companies. The study looks at stock excess returns across sectors and company size. The idea is that the passage of the FMA opens doors for potential mergers and consolidations across banking, financial and insurance sectors, translating into abnormal positive returns for businesses that are the likely candidate for mergers and consolidation. The results of the study suggest that the largest returns to the FMA passage were realized by large investment banks and insurance companies. The stock prices of banks, both small and large, seemed to be unaffected by the new legislation while thrifts, finance companies and foreign banks lost value.

Carrow Kenneth A. “Citicorp-Travelers Group merger:

Challenging barriers between banking and insurance”. Journal of

Banking and Finance 25 (2001): 1553-1571.

This paper is conceptually similar to the one cited above, in that the author investigates whether the announcement of a merger between Citicorp and Travelers abnormally impacted stock prices of financial and insurance companies. Analysis of abnormal returns surrounding the merger show that life insurance companies and large banks experienced significant stock price increases, while the returns of stocks of smaller banks, health insurers, and property/casualty insurers remain relatively unchanged.

Estrella, Arturo. “Mixing and matching: Prospective financial

sector mergers and market valuation”, Journal of Banking and

Finance 25 (2001): 2367-2392.

This paper analyses which types of mergers are likely to be most productive for banks and other financial firms in the United

States. The author acknowledges that the extent to which different business activities are fundamentally distinct induces a tradeoff between diversification gains and loss of efficiency. The research considers life insurance, property/casualty insurance, securities, and commercial firms as potential matches for firms and concludes that potential diversification gains arise from almost all combinations involving banking and insurance. The paper stands out because it shows, unlike other earlier research, that property and casualty insurance companies offer larger diversification gains to banks than life insurance companies.

Johnston, Jarrod and Madura J. “Valuing the potential

transformation of banks into financial service conglomerates:

Evidence from the Citigroup merger” The Financial review 35

(2000): 17-36.

The authors first summarize previous literature that examined motives for combining bank and other financial services. Diversification benefits and product complementarities (i.e. mortgage and mortgage insurance, auto financing and auto insurance) seem to be the prime motives. However, some earlier research also suggests that there are few linkages between bank services ands underwriting services in terms of customers, outlets, or other characteristics that generate efficiencies. Given the sources of potential gains, it appears that life insurance companies with their limited underwriting risk and wide variety of other products offered to individual customers would be more attractive targets for banks than other types of insurance companies.

Based on these observations, the authors propose to test whether commercial banks, insurance companies, and brokerage firms were favorably affected by the Citigroup/Travelers merger for impending consolidation of financial services firms. They measure the valuation effects resulting from the merger announcement among those commercial banks and financial services firms most likely to be affected and conclude that commercial banks, insurance companies, and brokerage firms have all experienced positive and significant valuation effects upon the announcement of the Citigroup merger. However, the authors find that the valuation effects are more favorable for brokerage firms than for commercial banks and for insurance companies.

Finally, the authors perform a cross-sectional analysis which concludes that the largest banks and the largest brokerage firms experience more favorable valuation than the smaller banks or smaller brokerage firms. Size does not seem to be significant for insurance companies

Problems

We are often told by Architects and Owners that we must obtain professional liability insurance in an amount higher than we currently carry if we want to work on a project with them. We always explain why this is not possible and we are sometimes told that they will go elsewhere for consulting services if we will not make an effort to find a higher limit policy. Our current policy has a $1,000,000/$1,000,000 limit.

This statement is provided to clarify this situation:

1.  While many companies have professional liability insurance, it varies greatly in its coverage. There are several types of policies. Electrical engineers can get policies that cover their work but as soon as the insurer discovers that they are developing a strategy of protection to protect millions of dollars--and sometimes Billions of dollars--in art or other museum collections, they are notified that their coverage does not cover this risk. Some have been cancelled by their insurer. Some consultants have a policy issued through a professional association that they call “professional liability insurance” but it is not true E &O coverage as required by architects and owners. It simply defends them against you and the policy specifically excludes burglar alarm design and does not cover losses of life, injuries, or losses or damage to property. A third type of professional liability insurance is true E&O but it specifically does not cover museum burglar alarm design or certain other risks.

2.  Our coverage is true professional liability insurance at the maximum amount available on the world market today. If we could get more, we would. But we can’t. No one can. It covers

what we do and we can name the architect and owner as an additional insured if you request it.

3.  Higher limits are not available. We will not seek it because the application process takes hundreds of hours and involves providing copies of all current and some past projects to an insurance company to review. We have applied for additional coverage on many occasions in the past and have been told by our insurer not to ask for higher limits again. We have been told that our policy is a one of a kind policy and there is absolutely no chance of it being modified in any way.  We don’t care who you know, you can’t get it for us. We did a project for a famous Seattle billionaire who insisted that he could get higher limits and would pay for it. All we had to do is apply to the insurer who handles all of his personal and corporate insurance. After months of wasted time we were told that no one on the world market would write an higher limit policy.

4.  Our policy is a regular architect’s policy by a reputable insurer. In 24 years of business we have lost only one job because the owner would not believe that higher limits are not available. They subsequently hired a consultant who has no insurance whatsoever because the city’s insurance officer was too embarrassed to come back to us after making an ass of himself insisting that we didn’t know what we were talking about.  My point is that if the owner insists on higher limits it will be necessary to explain that higher limits are not available for security system design and protection strategy development for museum collections.

Why Insurance

Life Insurance Services are of high importance as they keep you

secured throughout your life. Just like other insurance services,

Life Insurance services charge you with a premium, but it covers

you for your entire life span. Earlier if you wanted to opt for a

life insurance policy, then you had to keep paying the premium

as long as you lived. This made the policy highly unpopular, so

companies altered certain plans of the policy and the insured

were asked to pay a premium for 12 years in exchange of being

insured throughout their life.

Insurance is an important component of any sound financial

plan. Different types of insurance protect you and your loved

ones in different ways against the cost of accidents, illness,

disability, and death. Decisions to be made prior to making an

insurance policy should be based on your family, age, and

economic situation. There are many forms of insurance and,

unfortunately, none covers all the plans that you are on the

lookout for. In finance sector there are many companies

provides you different types of life insurance services and plans

among them some really provide you sufficient coverage against

investment.

Because of these entire objective I feel the need of a research

study on Insurance Sector and available various companies in

market. For this purpose I chose a project on insurance

companies.

Research Method Used

Primary research

Primary research refers to information that is directly collected from the source. Another simple method of primary research would be to directly talk to your customers and get their feedback. Primary research can be both qualitative and quantitative. So some parts of the project are collected from primary research and hence I use both of two methods are given below:

Qualitative primary research:

Qualitative primary research involves gathering information

from interviews or focus groups.

Quantitative primary research:

Quantitative primary research involves the collection of numerical information from surveys. This information is then analyzed.

Secondary Research:

Secondary research is a type is research which includes

pertaining knowledge through interviews and survey etc.

1. Trade associations:

From the reports available with trade associations you can get information on the industries served, the standards that they observe and the leaders in their field. You can also get information on the latest trends, issues and competitors.

2. The marketing departments of local colleges:

The marketing department of any college can give you access to special research projects and reports prepared by students.

3. Chamber of commerce:

The local chamber of commerce in your area can give you information on your local community and local businesses. You can also get access to the maps of the area.

4. Insurance companies, banks and real estate companies:

You can information on the statistics of the communities to whom they provide services.

5. Wholesalers and manufacturers:

From manufactures and wholesalers you can get information on customers, problems if any, costs, industry standards etc

6. Libraries and other public information centers:

In the reference sections of libraries and information centers you can find a lot of resource materials and data.

Objectives

The very first step in all projects: business, home, or education, is to define goals and objectives. This step defines the projects outcome and the steps required to achieve that outcome. People, including project managers, do not spend sufficient time on this step or complete it incorrectly thereby ensuring an unsuccessful project completion.

Research Objectives:

The primary objective of this research is to develop and

implement an optimal, self-sustained, market-based insurance

system to provide a complete management of the risk factors in

European agriculture. Under this primary objective, the sub

objectives can be listed as follows:

To compare and contrast the effective insurance schemes.

To develop an insurance system that will eliminate

undesirable outcomes of information asymmetry such as

moral hazard and adverse selection.

To estimate the model parameters under different

constraints.

To train the agricultural households in order to

familiarize them with agricultural insurance and risk

management concepts using innovative techniques.

To test the applicability of the developed model by

measuring the farmer attitude towards the proposed risk

management tools.

Ultimately to create an effective demand that can sustain

the market for insurance products.

Expected Outcomes: During the course of the project, I

first expect to find an exogenous index that will be easy to

calculate, and will not be manipulated by the insured or

the insurer. Next, we expect to develop a feasible

insurance scheme which will enjoy political and socially

support. I also expect that the free training sessions

offered to farmers will achieve our mission of

familiarizing them with risk and insurance concepts.

Scope of Study

In India, insurance has a deep-rooted history. It finds mention in

the writings of Manu (Manusmrithi), Yagnavalkya (

Dharmasastra ) and Kautilya ( Arthasastra ). The writings talk in

terms of pooling of resources that could be re-distributed in

times of calamities such as fire, floods, epidemics and famine.

This was probably a pre-cursor to modern day insurance.

Ancient Indian history has preserved the earliest traces of

insurance in the form of marine trade loans and carriers’

contracts. Insurance in India has evolved over time heavily

drawing from other countries, England in particular.

Insurance is one of the fastest growing sectors in India.

Scope of Insurance Project Study is given below:

The insurance sector is a colossal one and is growing at a

speedy rate of 15-20%.

Together with banking services, insurance services add about

7% to the country’s GDP.

All-developed and evolved insurance sector is a boon for

economic development as it provides long- term funds for

infrastructure development at the same time strengthening the

risk taking ability of the country.

I n d ustry A n a l ys i s

Insurance can be defined as, "assurance for uncertainty".

Insurance is about something going wrong. It is often about

things going right. One of the wonders of human nature is

that I never believe anything can actually go wrong.

As I know Indian Insurance sector was an open competitive

market. Due to several frauds in late 18th century sullied

insurance business in India as a result one nationalized

company viz. 'LIC' came into existence. And after the

liberalization of Indian economy the Life Insurance market has

now opened for private players.

The business of life insurance in its existing form started in

India in the year 1818 with the establishment of Oriental

Life Insurance Company in Calcutta.

Some of the important milestones in the life insurance business

in India are.

1870: Bombay Mutual Life Insurance Society the first Indian

Life insurance Company started its business.

1912: The Indian Life Insurance Act enacted as first statue to

regulate the life insurance business.1928: The Indian Insurance

Companies Act enacted to enable government to collect

statistical information about life and non life insurance business.

1938: Earlier legislation Ire consolidated and amended to the

insurance Act.

I n s ura n ce R e g u l a t o ry a n d D ev e l o p m e n t

A u t h o r i t y ( I R D A )

Reforms in the insurance sector were initiated with the

passing of the IRDA Bill in parliament in December 1999. The

IRDA since its incorporation as a statutory body in April 2000

has fastidiously such to its schedule of framing regulations and

registering private sector Insurance companies.

The other decisions taken simultaneously to provide

supporting systems to the insurance sector in particular the

life insurance companies were the launch of the IRDA online

service for issue and renewal of license of agents.

Bottlenecks I Government Regulation

The IRDA Bill proposes tough solvency margins for private

insurance firms, a 26% capital on foreign equity and a

minimum capital of 100 corers for life and general insurance

and Rs. 200 corers for reinsurance firms. Section 27A of

Insurance Act Stipulates that life insurance companies

required to invest 75% of its accretions through a controlled

fund in mandated government securities. Life Insurance

Company may invest the remaining 25% in private corporate

sector, construction and acquisitioning of immovable assets

M ajor p rivate pla y ers in I nd i a

1) ICICI Prudential :

ICICI prudential Life Insurance company is a joint

venture between ICICI bank a premier financial

powerhouse and Prudential, a leading international

financial service group head quarter in the United Kingdom.

ICICI prudential was amongst the first private sector

insurance company that came into existence in December

2000 after receiving approval from Insurance Regulatory

Development Authority (IRDA)

ICICI Prudential equity base 74% and 26% stake

respectively.

The company has a network of over 50,000 advisors as

well as 7 bank assurance tie ups. Today ICICI Prudential

has emerged as No.1 private life insurer in the country

with a wide range of flexible products that meet the needs

of the customer at every step in life.

2) Bajaj Allianz :

A house hold name in India teams up with a global

conglomerate. Bajaj Auto Ltd. The flagship company of Rs.

8000 corers. Bajaj Group is the largest manufactures of two

wheelers and three wheelers in India and one of the largest

in the world.

Bajaj Auto has a strong brand image and locality

synonymous with quality and customer focus with over

15,000 employees. It has joined hands with Allianz to

provide the Indian consumer with a different option in

terms of Life Insurance products.

3) HDFC Standard Life:

HDFC Standard Life Insurance Company is a joint venture

between India's largest housing finance provider- HDFC

Ltd. And Europe’s largest mutual life insurance company The

Standard Life Assurance Company (U.K.)

HDFC standard life insurance company limited is the first

private sector life insurance company to be granted a license

by IRDA.

4) Birla Sun Life Insurance Company Limited:

Birla Sun life Insurance is the joint venture of Aditya Birla

group and Sun Life Financial of Canada to enter in Indian

Insurance sector. The Aditya Birla group multinational

conglomerate has over 75 business units in India and

overseas with operations in Canada, USA, UK, Thailand,

Indonesia, Philippines, Malaysia and Egypt to name a few.

Today the Sun Life Financial Group of companies and

partners are represented globally in Canada, The United

States, The Philippines, Japan, Indonesia, India and Bermuda

M arket S h are of D i f f e r e n t P l a y e r s

Even after liberalization and entry of private player in

insurance sector, the majority of market is shared by LIC of

India. The No.1 private life insurance is ICICI prudential with

13.7% of total market share. Bajaj Allianz contributes to

10.3% of total share where as HDFC SLIC has managed to earn

only 4.1%. From the above chart, one can say that private

companies are still struggling to capture maximum market

share. Birla, Sun life, Reliance life, and MNYL have 3.4%, 3.4%

and 2.4% of market share respectively.

The top 5 life insurance companies in India control 85% of

market share while the remaining dozen are still struggling to

set up their operation.

Reference

References derived from a number of sources. All sources are

reliable. They are given below:

www.irda.gov.in

CA Clubindia

MBA Clubindia

Agent's Sales Journal

Chartered Insurance Institute

Claims Magazine

Insurance & Technology

Insurance Networking News

Insurance Institute of India:

Symbols:

Thank

You

By Akbar Ali

Ansari